A parent charges $800,000 for services provided to a subsidiary and reports this amount as service revenue. The price reflects a markup of 25% over cost. Both companies report service expenses as part of operating expenses.

What eliminating entry is necessary with respect to this intercompany transaction?

Select one:

A.Debit investment in subsidiary, credit operating expenses for $640,000

B.Debit service revenue, credit operating expenses for $800,000

C.Debit beginning retained earnings, credit operating expenses for $160,000

D.Debit service revenue, credit operating expenses for $640,000

C is Incorrect